General Insurance Article - ABI issue warning about Discount Rate


The expected move by the Lord Chancellor to change the Discount Rate which is used to calculate compensation payments could see insurance premiums increase for millions, the Association of British Insurers warned today.

 Liz Truss has committed to announcing the result of a review into the rate by the end of February.

 Director General of the ABI, Huw Evans, said: “This is an unnecessary review being carried out using a broken and outdated formula that does not reflect how claimants actually invest the money they receive. Millions of customers could see their premiums increase unnecessarily if Liz Truss continues down this path.”

 The discount rate is a figure used to calculate lump sum payments for people who suffer a severe personal injury, taking into account what return they are likely to receive when the sum is invested. It has been set at 2.5% since 2001.

 Find out more about the Discount Rate here.

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